The SEC announced today it filed an injunctive action in U.S. District Court for the Southern District of New York alleging that from approximately January 2006 to February 2007, Louis W. Zehil, a corporate attorney, and two entities he controlled engaged in a fraudulent scheme to sell millions of shares of securities in violation of the antifraud and registration provisions of the federal securities laws. With the consent of the parties, Judge Preska entered an order granting a preliminary injunction, an asset freeze, the appointment of a receiver and other relief. Zehil was until recently a partner with the law firm of McGuireWoods LLP.

The Complaint alleges that between January 2006 and February 2007, Zehil represented seven public companies in issuing their stock in PIPE transactions (private investments in public equity) and Zehil personally invested in the issuers' PIPE transactions. In the subscription agreements for each PIPE transaction, the Defendants agreed (as all the PIPE subscribers did) that the shares they received would be issued with restrictive legends until such time as the issuers filed registration statements with the Commission and the Commission declared them effective. As counsel for the issuers, Zehil then sent letters to the issuers' transfer agents directing the issuance of shares to the PIPE subscribers. Zehil's letters instructed that all the shares should bear restrictive legends except the shares issued to his entities. As a result, the Defendants were able to receive shares without restrictive legends, which they quickly sold into the public market, and generated illicit profits of at least $17 million.